April 25, 2013

JUST A MATTER OF LOOKING FOR THEM:

Wheels Are Falling Off the Supercycle (LIAM DENNING, 4/25/13, WSJ)

Two things underpinned the upswing in industrial commodities. First, low prices discouraged investment in new oil fields and mines through most of the 1980s and 1990s. Second, demand in emerging markets, especially China, jumped.

Neither factor will hold this decade in the way they did during the last.

High prices have encouraged investment in new supply. The most obvious example is the rebound in U.S. oil-and-gas production. Globally, spending on oil-and-gas resources is forecast by consultancy IHS Herold at almost $700 billion this year, more than four times the level of 10 years ago.

Something similar is happening with industrial metals and minerals. Caterpillar CAT -0.38% just cut its guidance, citing weak demand for mining equipment. Excess capacity has weighed on aluminum for years and has started hitting iron ore.

Now, copper is starting to feel the effects.

Posted by at April 25, 2013 4:28 AM
  

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